Monday, August 8, 2011

Nottingham Forest - Shadows And Tall Trees

Last season was a bit of a déjà vu experience for Nottingham Forest fans, as their team looked a good bet for promotion to the Premier League for much of the campaign, only to be defeated in the Championship play-off semi-final for the second year in a row. Their disappointment was not lessened by the fact that they lost to the eventual winners, Swansea City and Blackpool, on both occasions.

Yet again, the team’s performances had promised so much, built on the formidable partnership of Wes Morgan and Luke Chambers in central defence providing solid protection to goalkeeper Lee Camp, whose form was good enough to win a couple of international caps for Northern Ireland. The experience of midfielder Paul McKenna and forward Rob Earnshaw was complemented by the emergence of the exciting young Lewis McGugan, who was the club’s leading scorer with an impressive 13 goals.

Nevertheless, football is the ultimate results-based game, so it was no huge surprise when manager Billy Davies was sacked in the summer, to be replaced by Steve McClaren. Inevitably, the appointment of the so-called “wally with the brolly” raised eyebrows, but apart from his ill-fated reign as England manager, McClaren has a pretty good record and is an experienced coach. He revived his reputation by guiding FC Twente to the Dutch championship after the England debacle, though his time managing Bundesliga side Wolfsburg was not so successful.

"Return of the Mac"

His misfortune in Germany certainly hasn’t dented his confidence, as seen by his prediction during his first press conference, “I wouldn’t be sat here if I didn’t think I was the man to fulfil everybody’s dream of playing in the Premier League. That is the ultimate goal.” In order to boost Forest’s promotion prospects, McClaren has brought in Rob Kelly, the former Leicester City boss, as assistant manager and Jimmy Floyd Hasselbaink, the old Chelsea and Holland striker, as first team coach.

Many felt that Davies, described by Forest owner and chairman Nigel Doughty, as “probably the best manager, at this level, in the game”, was unfortunate to be dismissed and there is little doubt that he did a fantastic job in turning round the fortunes of a team that was struggling in the Championship relegation zone when he took over, after only winning twice in 19 league games under Colin Calderwood. Indeed, Doughty admitted, “Billy Davies was unlucky to lose his position and unlucky in two play-offs, when we came close. In the end, we felt that to motivate the squad for a third time, under the same sort of leadership, would have been difficult.”

However, that’s only part of the story, as Davies’ public grumbling about lack of funds and frequent sniping at the club must surely also have been a contributory factor to his demise. Quite frankly, statements like “there is not a job that I would not consider” were just asking for trouble, especially given that Davies has plenty of previous for similar outspoken rants against the board at Derby County and Preston North End.

"The always appealing Billy Davies"

Eventually, these shenanigans proved too much for Doughty, who relieved Davies of his duties. A co-founder of the leading private equity firm Doughty Hanson, he is known for his financial expertise, which stood him in good stead when he took over the club in 2002. In fact, it’s probably not over-stating the case to say that without his guarantees, Forest would almost certainly have ended up in administration.

The club had been in financial turmoil for many years, finally abandoning their membership structure in 1997, leading to an ill-fated takeover by the Bridgford Consortium, featuring former Tottenham chairman Irving Scholar, serial entrepreneur Nigel Wray, businessman Julian Markham and author Phil Soar. Their ambitious plans effectively collapsed after a disastrous flotation on the Alternative Investment Market, which raised just £2 million – about £18 million less than they had predicted. However, Doughty’s initial attempts to take over the club were strongly resisted by Scholar and Markham, and his investment was only confirmed after he won a bitter court case.

That was not the end of Forest’s financial woes, as the collapse of ITV Digital left them with substantial levels of debt. Indeed, in 2004 Nottingham City Council threatened the club with winding-up proceedings after Forest failed to make a £200,000 interest payment on their £4.3 million loan.

"Nigel Doughty - money can't buy him love"

These days, Forest are in a more robust financial position, but that is very largely due to Doughty and the funds he has injected into the club. Despite this investment, he is not universally popular with some of the Forest supporters, who believe that his cautious approach has held the club back, but the reality is that they owe him a great deal – quite literally, in terms of the club’s debts, which have been steadily increasing from £25 million in 2005 to £64 million in 2010.

Virtually all of this debt (£63 million) is owed to Doughty. Although the loan is secured by a debenture over the clubs assets and earns interest at “market determined rates”, Doughty has not been paid any of the accrued interest of just under £10 million. Instead, the date for the repayment of the principal and the accrued interest has been continually pushed back with the latest extension to 31 May 2013. In fact, Doughty has stated, “I am not looking to get my money back. I look at it as some sort of community investment”, though that’s not quite the same as a formal agreement.

The other £1 million debt is the residual amount owed to Nottingham City Council from the original £4.3 million six-year loan (at 5.25% per annum), which was due to be finally repaid last season.

It is notable how the make-up of the debt has changed since 2005, when it largely comprised an expensive bank overdraft and short-term loans. If Doughty had not stepped up to the plate, it’s doubtful whether this funding would have been renewed. Even if the banks had agreed to extend more credit, it would certainly have been more costly for the club, as the interest rate would have been higher (and needed to be paid).

Forest also owe £1.8 million in transfer fees plus have a similar amount in contingent liabilities: £1.5 million to be paid if certain players make an agreed number of international appearances and £0.5 million signing-on fees to players if they are still at the club on specific future dates.

Of course, this leads to one of the major criticisms that fans have of Doughty’s regime, namely that they have not been very active in the transfer market. Like so many things, this depends on how you look at it. In fact, in the last three years, only three clubs in the current Championship have spent more than Forest – and two of those (Birmingham City and Burnley) have had the benefit of Premier League money, with Birmingham now holding a fire sale of their more expensive players and question marks over their very existence. The other club ahead of them is Leicester City, who have effectively bet the farm on securing promotion, as it is questionable how their new Thai owners would react if they failed to achieve this objective.

With the exception of Leicester, very few other Championship clubs have really gone for it, as a new financial realism is being embraced. As Doughty put it, “Leicester don’t seem to have got the memo, but everyone else seems to get the idea, which is why there has not been that much activity.”

On the other hand, Forest’s net spend in this period was only £7.5 million, so their high position in the net spend table is more a case of them standing still, while others have balanced their books by selling players. In other words, if Forest have strengthened, they have done so more in relative terms than absolute terms, though the switch from Forest being a selling club should not be under-estimated, e.g. in the four years up to 2005 they had net sales proceeds of £22 million, but since then they have been net spenders every single year, adding up to £16 million.

Then again, Forest’s recent transfer spend is a little misleading, as most of this (£10 million) came in 2008 and 2009 with hardly anything in the following two years. In particular, Forest backed Davies in the summer of 2009 by signing nine players, many of whom played for the club on loan the previous season, including Dexter Blackstock, David McGoldrick, Dele Adebola, Chris Gunter, Lee Camp, Paul McKenna, and Radoslaw Majewski, giving them the unwanted reputation of being big spenders. Many of these players significantly improved the side, but it was unreasonable for Davies to expect similar investment every year, especially when he talked about needing “four or five stellar signings.”

That said, it was disappointing that Forest did not manage to sign anyone in the January 2010 transfer window, when they were in the Championship top two, as this might have made the difference between automatic promotion and the play-offs. It was an open secret that they were after Nicky Shorey (Aston Villa), Darren Pratley (Swansea City) and Victor Moses (Crystal Palace), but they failed to secure any of their targets. It’s unclear why this was the case, nor why there was a similar lack of purchases in the following two transfer windows.

The much-maligned chief executive Mark Arthur argued, “You cannot force people to sell. We tried everything we could possible try to get the players in, but it didn’t come off.” It’s hard to know for sure, but there is a suspicion (to paraphrase Hamlet) that he “doth protest too much”, especially as the board must have been tempted to keep their hands in their pockets when Davies was effectively a dead man walking.

"Jonathan Greening - the face of experience"

In any case, it’s always better to watch what people do, rather than listen to what they say: actions speak louder than words. Since McClaren’s arrival, very little money so far has been spent, as Forest have adopted a policy of buying in older, experienced Premier League players on the cheap. Former Forest star, Andy Reid, and Dutch midfielder George Boateng were acquired on free transfers, while Jonathan Greening only cost £600,000 from Fulham. Furthermore, quite a few players have been released, including Kelvin Wilson, Nathan Tyson, Earnshaw, Adebola and McKenna.

It’s possible that some Forest fans have unreasonable expectations, which are heightened by a glorious past, though in truth this largely relates to one magical period under the legendary Brian Clough and his assistant Peter Taylor, whereas the rest of the club’s history is not so impressive. After gaining promotion from the old Second Division in 1977, Clough’s Forest become Division One champions at the first time of asking in 1978 and then proceeded to win the European Cup two years in succession, first beating Malmö 1-0 in 1979 with a header from Trevor Francis and then retaining the trophy by overcoming Hamburg 1-0 with a John Robertson strike the following year. In the same purple patch, they also picked up two League Cups.

This was a remarkable achievement for a club of Forest’s size and was testament to the genius of the manager, as the team featured few superstars, though the likes of Peter Shilton, Martin O’Neill, Viv Anderson, Archie Gemmill and Kenny Burns would yield to few. As Steve McClaren said, “You can smell the history and tradition of this football club.”

"Brian Clough - legend"

However, recent history has not been so kind. Although Forest played in the first Premier League in 1992/93, they were relegated at the end of that inaugural season, which was also the end of the Clough era. They immediately bounced back, but dropped back down a couple of years later, a feat they repeated before falling back into the Football League in 1998/99. Since then, Forest have spent 12 long years away from the Premier League and the riches that accompany playing in the “best league in the world”, which goes a long way to explaining the reasons for their financial challenges.

In fact, the situation got even worse, as Forest became the first European Cup winners to fall into their domestic third division, when Gary Megson’s team was relegated in 2004/05. It took the Tricky Trees three years to get back into the Championship, which makes the board’s prudent policy a little more understandable.

Recently, Doughty described the approach in this way, “We are trying to push the boat out, but in a gentle fashion.” This reasonable desire for sustainability has led some fans to condemn the board for a lack of ambition. In particular, many have never forgiven them for failing to support former manager Paul Hart, who built an attractive young team, but was not given the funds to strengthen the squad and actually had to sell some of his key players.

"Lewis McGugan - helping Forest fire"

One specific source of frustration has been the clumsily named Transfer Acquisition Panel, which comprises the chairman, chief executive, manager, finance director, chief scout and football consultant David Pleat. The idea is to avoid the club wasting precious funds on a manager’s whims. As a concept, this sounds fine and many other clubs have something similar, e.g. Lyon who are past masters in the transfer market.

However, there are three potential problems with Forest’s version: (a) It seems far too bureaucratic with no fewer than six people involved. (b) It is not entirely clear what role the football consultant has – is he meant to be a de facto director of football? If so, the temporary nature of a consultant could cause problems. (c) Having had their fingers badly burned by former manager David Platt who wasted £12 million, largely on obscure Italian veterans, it looks like the club’s stance might have swung too far the other way, so they’re now loath to pull the trigger on a deal.

To a certain extent, Forest have tried to compensate by making good use of the loan system with a number of signings having an impact last season, including Scottish striker Kris Boyd (from Middlesbrough, six goals in 10 games), England U21 defender Ryan Bertrand (Chelsea), Wales captain Aaron Ramsey (Arsenal), left-back Paul Konchesky (Liverpool) and forward Marcus Tudgay (Sheffield Wednesday).

"Lee Camp makes his point"

Many Championship clubs have taken advantage of new rules that allow them to take up to six players on loan at a time, a trend that has been exacerbated by the introduction of a 25-man limit in the size of the squad for Premier League teams. The reason for this might not seem immediately obvious, but that cap does not include players aged 21 and under, resulting in Premier League clubs taking on more quality young players. They need playing time, so clubs are now more willing to loan players to the Championship, even funding some of the wages during the loan period.

While Forest’s attempts to move towards a sustainable business model are admirable, there is a nagging belief that if they were just to spend a little more then they could finally reach the Premier League, which would transform their finances. Obviously, spending would be no guarantee of success, but it is worth considering the size of the prize.

The Championship play-off final has been described as one of the most lucrative matches in world football with the value estimated at £90 million. Although this is a little misleading, given that this money is spread over a few seasons, the difference in revenue following promotion is still spectacular.

Even if the promoted club were to finish last and come straight back down, it would still receive £40 million from the TV deal plus £48 million in parachute payments over the next four years (£16 million in each of the first two years, and £8 million in each of years three and four). On top of that, gate receipts and commercial income will also certainly be higher, hence at least £90 million more revenue.

It’s incredible to think that just one place in the football pyramid can make such a difference. Of course, if the club finished higher in the Premier League, it would receive even more TV money and every season survived adds another £40+ million to the coffers.

The concern is that the club might eat into that higher revenue by increasing wages and other costs, but the net effect is still likely to be positive. If we look at the three teams that were promoted to the Premier League in 2008/09, using the last available financial figures from 2009/10, we can see that all of them (Wolverhampton Wanderers, Birmingham City and Burnley) transformed operating losses in the Championship to profits in the Premier League. In particular, Wolves’ revenue of £18 million (broadly similar to Forest) increased to £61 million in the Premier League.

As it stands, Forest’s profit and loss account is not a pretty sight, as they consistently make losses. All too appropriately, the bottom line is a sea of red with losses reported in each of the last five years. In that period, the total losses add up to more than £40 million. Furthermore, the losses have been steadily rising, from £5.1 million in 2007 to a seriously uncomfortable £12.3 million in 2010. In other words, the loss is almost as much as the turnover of £14.7 million, which means that the club spends almost £2 for every £1 it generates. As the accounts state, this can only be “sustained with the continuing financial support provided to the club by its chairman, Nigel Doughty.”

Alternatively, some clubs compensate for such shortfalls by player sales, but this is not the case at Forest, as they have made less than £5 million from the transfer market in the last five years, including just £91,000 in 2010. Some clubs can point to their losses being caused by non-cash expenses, such as amortisation and depreciation, but again Forest do not have that comfort, as their EBITDA (Earnings Before Interest Taxation Depreciation and Amortisation) is also negative every year.

Not even the promotion from League One to the Championship was enough to improve the club’s finances, as the £4.5 million increase in revenue in 2009 was more than offset by investment in the squad, resulting in wages rising by £3.5 million and player amortisation by £1.1 million. Similarly, the 22% revenue growth in 2010, largely from the new television deal, was eaten up by £4.4 million extra on the wage bill and a further £1.1 million on player amortisation. These numbers should give pause for thought to those who censure the board for not investing in the playing side.

Of course, the vast majority of Championship clubs make losses. In fact, only four reported a profit before tax in 2009/10 and one of those, Burnley, had the benefit of Premier League money. The total losses in the Championship worsened for the sixth consecutive year to a record of around £130 million, while the total net debt rose to £875 million.

That said, Forest’s loss of £12.3 million was one of the highest and only surpassed by four clubs: Sheffield United, Ipswich Town, QPR and Portsmouth. Incidentally, the size of the loss appears to have little bearing on a team’s chances of success, as the three promoted clubs in 2010/11 represented all points on the spectrum: granted, QPR made a large loss, but Norwich City only had a small loss, while Swansea City were actually profitable.

But, as Bob Dylan said, the times they are a-changin’ following the Football League’s recent decision to adopt a Financial Fair Play (FFP) framework from the 2012/13 season. Football League chairman, Greg Clarke, explained the reasons for the move, “It’s a perfect storm in that a lot of things have come together to make this happen, including of course the level of debt in the game and big losses being racked up by the clubs.”

"You'll never beat Wes Morgan"

Details of how the scheme will work have not yet been finalised, but essentially clubs will only be allowed to spend what they earn. In the early years, clubs will probably still be permitted to make small losses, but these will be limited and the amount of money that owners like Doughty are allowed to put in to cover losses will be severely curtailed. Any club breaking the rules is likely to be punished with fines and a transfer embargo.

The impact on Forest, whose business model is essentially large losses funded by the owner, will be dramatic, as Doughty explained, “With the advent of financial fair play, we are going to have a very strict budget. We are talking about drastic cuts. It is going to change things. This year, we cannot afford to be throwing around three or four-year contracts for Premier League players.”

However, one logical result of the new rules is that those Championship clubs with parachute payments will have a significant financial advantage, as can be seen by the revenue “league table” for 2009/10. As you would expect, the three clubs that were in the Premier League the previous season (Portsmouth, Hull City and Burnley) have the highest revenue (between £45 and £60 million), while the next three teams in the (Middlesbrough, Reading and Derby County) still had the benefit of parachute payments.

However, Greg Clarke argued that the effect would not necessarily be so distorting, “Largely the parachute payments are absorbed by the club paying their debt and players. Last year three clubs came down and did not make the play-offs.” This is true, but the previous season was a different story with Newcastle and West Brom returning to the Premier League at the first attempt.

Forest’s revenue of £14.7 million places them in the bottom half of the money league, so they have actually outperformed their budget by twice reaching the play-offs. That said, two of the promoted teams (QPR and Swansea City) had less revenue than Forest, so a well-managed and organised team can still succeed in the face of financial disparity.

Any growth in Forest’s revenue in the last few years has basically been down to the promotion from League One (average £8 million) to the Championship. This is partly because of the better TV deal in the higher division, but is also due to higher gate receipts and more commercial opportunities. Indeed, gate receipts remain the most important category at Forest, accounting for 48% of total revenue. This increases to almost 60% if you include hospitality and catering income, which is largely generated on match days.

Gate receipts of £7.1 million in 2009/10 were 56% higher than the £4.6 million in League One, partly due to the decision to reduce ticket prices in the lower division, but also influenced by cup runs and participation in the play-offs. Forest have a large, loyal following, as evidenced by their 2010/11 average attendance of 23,275 only being bettered by four teams (Leeds United, Derby County, Norwich City and Leicester City). Even when Forest were playing in League One, they attracted a mighty impressive 20,000 on average.

In fact, Forest have the 22nd largest attendance in England, higher than three Premier League clubs. It’s not generally appreciated that the Championship is actually the third best-attended league in Europe, ahead of the top divisions in Spain, Italy and France. Even though crowds declined 6% in 2010/11, mainly due to the “Newcastle factor”, Doughty has confirmed that season ticket sales at Forest are still selling well.

Last week Forest revealed plans to expand the capacity of the City Ground, which is owned by the council, from 30,600 to 37,000 by rebuilding the Main Stand, but only if they reach the Premier League. Corporate facilities would also be revamped to help increase turnover. This was an interesting change of approach, as chief executive Mark Arthur had previously said that the costs of redeveloping the City Ground would be prohibitive, as it is located in a dense urban area, surrounded by private housing, businesses and industry.

Indeed, four years ago the club explored the possibility of building a 45-50,000 capacity stadium in Clifton to the south of the city, but switched their plans to Gamston, due to logistical problems. Following objections by residents, the club then looked at Eastside, though plans were abandoned after the failure of the FA’s bid to host the 2018 World Cup in England.

"You are going in the Trent"

Television revenue in 2009/10 of £4.3 million was largely derived from two payments given to all clubs in the Championship, the £2.47 million distribution from the Football League and the £1 million solidarity payment from the Premier League, plus money for cup runs and facility fees (each time a team is shown live is worth £100,000 to the home team, £10,000 to the away team).

In 2010/11, this figure is estimated to increase to around £6 million, as the solidarity payment rose £1.2 million (up to £2.2 million) and each Championship club was given £0.5 million as their share of the parachute payments for Newcastle and WBA, because those two clubs went straight back up to the top tier.

However, clubs relegated from the Premier League still have the advantage of considerably higher TV revenue, as we can see by comparing Burnley’s TV revenue of £34.4 million last year, which was significantly higher than Forest’s £4.3 million. Even after relegation to the Championship, Burnley’s projected revenue will still be more than Forest, purely due to the £16 million parachute payments.

The other cloud on the horizon is the new Football League three-year TV deal that kicks off in the 2012/13 season, which will be £69 million lower than the current contract at £195 million, a reduction of 26% or £23 million a season, reflecting what Greg Clarke called, “a challenging climate in which to negotiate television rights.” As there was no interest from BBC, ITV or even ESPN, the only game in town was Sky, who could accordingly lower their bid.

Given that most of the money is allocated to the Championship, this is where the impact will be most keenly felt. The annual reduction for each club was estimated at £766,000 by the Ipswich chief executive, Simon Clegg. This is another reason, if one were required, to push as hard as possible for promotion.

Commercial revenue of £3.3 million includes around £1 million from sponsorship and advertising. Shirt sponsorship is provided by Victor Chandler, the gaming group, who replaced long-term partner Capital One in 2009 with a one-year deal that has since been extended by a further two years to 2012. Figures have not been divulged, but it was originally a “significant six-figure sum”, now rising to “seven figures”. Interestingly, if Forest had won the Championship in 2010, that would have cost the sponsor around £6 million, as it had promised to pay for season ticket renewals if that happened. The kit supplier is Umbro, but merchandising revenue is only £1.1 million. The club state that this is partly dependent on which kit is replaced, the home version being more popular.

Like most football clubs, Forest’s greatest challenge is how to restrain their wage bill while remaining competitive. Transfer activity caused this to rise a staggering 40% in 2009/10 from £11.2 million to £15.6 million, resulting in an unsound wages to turnover ratio of 106%, second only to the 121% in 2006, when the board sanctioned the purchase of players on Championship wages in order to secure promotion from League One as quickly as possible.

This is a common problem in the Championship, but Forest’s wage to turnover ratio is well above the divisional average of 88% and was only surpassed by five other clubs (Bristol City, QPR, Portsmouth, Ipswich and Preston). It is easy to see how the club arrived at this sorry state, as wages increased by more than 70% (£6.5 million) in the last five years, while revenue only grew 20% (£2.5 million) in the same period.

To give an idea of the magnitude of Forest’s challenge, if they wanted to get in line with the 60% salary cap employed in League One, they would have to either increase their revenue by 77% (£11.3 million) to £26 million or cut their wage bill by 43% (£6.8 million) to £8.8 million, neither of which seems very realistic (though FFP may play a part here).

In fairness, Forest’s wage bill is by no means the highest in the Championship, placing them more or less in the middle of the league table. However, unlike the Premier League, the wage bill does not necessarily correlate with success on the pitch, as Doughty pointed out, “If you look at our roster and our salary bill and you look at the teams who were promoted, we were way ahead of Swansea, we were ahead of Norwich in terms of cost and, until Christmas, we were on a par with QPR.”

Forest’s finance director, John Pelling, clearly spelled out the situation, “The club can only spend the level it does on transfers and wages with the continuing support of Mr. Doughty.” The chairman’s commitment can be seen in the cash flow statement, which shows that Doughty has advanced £46 million of loans in the last six years, including £13.4 million in 2009/10 alone. Pelling noted, “That is pretty much the total loss for the year”, while Mark Arthur observed, “It is double the amount we received from season ticket and match day ticket revenue.”

So what will Forest’s strategy be going forward?

In a recent interview, Doughty indicated the club’s future direction when talking about its youth policy, “What is coming out of the academy may help us, when it comes to financial fair play, because those players are not going to be as expensive. We have a wonderful conveyer belt of young players coming through. Not just one or two or half a dozen, but maybe as many as a dozen good prospects, many playing internationally already.” Forest have a reputation for a terrific academy, as evidenced by the emergence of former graduates Lewis McGugan and Wes Morgan, which should be further strengthened by the appointment of McClaren, who has a fine reputation for developing young players.

Perhaps the bigger question, as posed by John Pelling, is “what would happen if (Doughty) wasn’t around to provide the backing that he does?” The benefactor model works fine, so long as the money-man does not exit stage left for whatever reason. Like his father, Doughty is a Forest fan, born in Newark, near Nottingham, and maintains that he is still committed to the club. However, Mark Arthur has hinted that his presence should not be taken for granted, “When you are putting in that sort of money and getting the abuse he has received, it must make you think about it.”

"Guy Moussi - shout to the top"

Of course, this may not be such an important issue in future with the advent of FFP, but there's many a slip 'twixt cup and lip, so Doughty’s financial support may still be necessary for a while yet. Doughty himself has not ruled out selling, “I am not going to say never. If the right sort of potential owner with hugely deep pockets came along, you would have to consider it.”

It is clear that some fans would prefer a new owner with a more cavalier approach to spending, but there are two problems with this way of thinking. First, it’s not as if billionaires are queuing up to invest in football clubs; second, be careful what you wish for. Forest fans only have to look at the calamitous experience their neighbours Notts County endured with Munto Finance to realise that all that glitters is not gold.

The easiest way of solving Forest’s financial problems would be to gain promotion to the promised land of the Premier League. While it is fair to say that the club’s prospects of achieving that objective would be enhanced by some astute player purchases, it is equally true that spending in itself is no guarantee of success in the extraordinarily competitive Championship. That said, Doughty has actually promised to back McClaren “as far as new acquisitions are concerned”, and there is talk of Ishmael Miller and Wesley Verhoek arriving from WBA and Den Haag respectively.

"Pre-match tension from Chris Cohen"

However, those fans hoping for a major loosening of the purse strings are likely to be disappointed, as Doughty recently summed up his ethos, “If you look at the teams who have been promoted in the last few years, such as Watford, Burnley, Swansea and Norwich – they have all done it with sensible budgets. They did not do anything too risky or expensive.”

So, there you have it, more of the same for Forest. And in the current economic climate, who can really blame them?

What is clear is that the delusion that some Forest fans portrayed constantly that they are debt free and an amazingly well run club is wrong. Simply put, if Doughty wasn't there, they would be in the same state as Pompey et al.

Great article, but still need someone to explain to me how in every popularity matrix we're top 6 yet our revenue is bottom half. Tickets aren't cheap and people buy the shirts... is it just that we haven't sold anyone for ages?

Anonymous said .... Forest is in the top 6 yet our revenue is in bottom half...

Top six - are you having a laff mate. Forest are one of the most hated clubs we have, the players were dirty players because of Billy D and enjoyed being so. That alone is nothing to be proud of, do you really think putting in more seats will draw more fans in ... NO it won't, their hard earned money will be better spent somewwhere else !!!! We DON'T buy the shirts, honest not many do now. JOE x

We agree with Joe x, not many Forest fans are bothering to buy the shirts, according to the shop, We will not bother either this year as money is tight at our house with three fans to buy for. Think the season tickets will have to go too, we will pay on the day for the matches!

Doughty's policy of drip feeding, what amounts to a small fortune ( and one wonders why he really does it) will never have the desired effect. If he had pushed the boat out just one season in the passed 10 years and invested even a fraction of that total he would have recovered most of it through promotion. It has been proved that you can ( or could) buy promotion.

Alternatively, a more frugal approach, buying up and coming talent from the lower leagues, rather than blowing millions on the likes of Earnshaw would have been more sensible, and in my opinion more successful approach, as Norwich and Swansea have proved.

Whatever your opinion on Doughty's generosity, the simple fact is the club has been grossly mismanaged, and the money wasted.

The Financial Fair Play framework will make a huge difference and Forest cannot afford to have players on long term lucrative contracts. As Doughty has said it will be no good having a squad of seven in 2012. Nigel is a Forest fan and I hope he realises how much a lot of us appreciate his support. Trentender

It's ok fans saying that they shouldn't let players go for free. They would be the first to start a riot if, for example the club sold Chambers or Camp.Also the suggestion that ND should have spent more early on" because he would have recovered it from increased revenues following promotion" is the logic that causes many gamblers to lose their shirt.

EXCELLENT BLOGForest are very lucky to have a chairman who is a comitted local guy, with the financial resources and expertise to not only back them, but to be genuinely interested in improving the side as opposed to his bank balance.

very good article. if nigel had given davies those couple of players and we had gone up he would have recouped the debt straight away. if the reds had dropped back down like blackpool he would still have got the parachute payments. it looks like penny wise pound foolish.

Interesting,but what it does not address is the clubs inability to attract quality players.Those that we are looking at go somewhere else for some reason and when we have one on the hook we lose him..............why?

Fantasically informative piece,Our Chairman is the only reason the great club exists. Faults or failings must be put aside and replaced with absolute appreciation we have a club to support every weekend. Carry on Nigel and thank you.

As a life-long Forest fan, I appreciated this article as a valuable insight, thank you (though of course, didn't appreciate the financial status of the club, it's scary!). What really winds me up though is how we continue to give away our best players....why do we do this? Surely better to sign them to contracts so if the situation arises we can sell them? I think Commons was rated at £3-5million when we gave him away to some club or other, having just gained promotion from League 1...oh yeah, our bitter rivals Derby, great! Oh, didn't we give them another promising player this summer? They must love us! What could those players have earned us?...Earnshaw, Tyson, Wilson, McKenna etc - good talent, £10-£15 million? Anyway, good luck McClaren, and thank you Mr Doughty.

Another fine article, I am so glad I came across it. Continue the very good work. This side of foodball I once belived was just a black hole so I thank you for opening my eyes. After reading Moneyball I wanted a similar one on football and I noticed you mentioned socanomics (excuse the spelling) I believe are there any others you would recommend?

superb article, putting into detail what i've been blogging on the forest website for months, we truly have a huge debt of gratitude to pay to Nigel Doughty for essentially bailing the club out year after year, it is a worse situation than i imagined,consolidation of finanaces is top of the agenda i think. Thanks for looking after us nigel.Red Dog

Another well researched, well written piece. There are large elements of it where you could replace Doughty with McCabe and Nottingham Forest with Sheffield United and no one would notice. Very similar problems at both clubs, the Blades' problems exacerbated by relegation.

Great piece as ever and maybe a few Forest fans will be less down on Doughty now.

Problems seem to have been an inability to develop players will big sell on value - too often, the big signings like McKenna and Earnshaw have been effective at times but beyond their best years. If Forest had had an under-25 year old like Shane Long or Matt Mills, they could perhaps have made the kind of money that could help them rebuild the team a bit. Hence, I'm not sure of the wisdom of bringing in the highly paid likes of Reid, Boateng, Greening and McLaren himself. Perhaps they need to cash in on McGugan?

Great piece once again Kieron. Many thanks for continuing to publish these pieces - they're very insightful. Out of curiousity, where do you find the financial statements to these clubs, particularly the European big names? Best, Paul

Thanks - I'll look into it. I'm in Switzerland too btw. Based in Winterthur. If you want anything looking at correlation / statwise I'd be happy to help! On the data, you look to have it covered but what about linking in a few things like league performance. I'm speaking off the top of my head here but perhaps there's some index that can be created to link (for example) wages with win ratios, goals F and A, league position. Could a alternative league table be created showing under/over achievement relative to finance?

Excellent article. Very interesting that Derby have double the turnover that we do! Attendances could be better @ some games. Lowering the ticket prices would attract more fans. £33 for the Derby game tomorrow is steep. Better to have an average attendance near full capacity and generate more revenue. The release of Wilson was a joke. Why let him go for free & have no intention of playing him in 2nd part of season when Celtic offered £400k in January transfer window, not to mention paying his wages for 6 months! Also shirts pricey. Bought top @ £50 when 1st came out then they had 20% off a few weeks later for one day! Should have been £40 to start with! Greening and Boateng look like has been liabilities already and I think we have signed to many denfensive midfielders and strikers when the positions we really needed strengthening were left-back and on the wings.

I enjoy reading it not just about forest but other clubs too. Forest need to change strategy regarding player transfer they don't need to buy just get free transfer. I notice every year there are 3-6 well known players become free transfer and willing to move to smaller club....without buying player Forest can save 2-3m amortization and use it to boost salary...i bet they will get promotion in 2-3 years if they smart enough to get those great free transfer.

Praise for The Swiss Ramble

"Blogger of the Year 2013 - It’s testament to the effect that Kieron has had on the blogosphere that so many fans take his word as gospel. Putting to use his career in the world of finance, his insights into balance sheets and simple explanations of complex ideas appeal to the hardcore financial whizz and casual fan alike." - The Football Supporters' Federation